Indian companies sit on a cash mountain—will shareholders reap the rewards?

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Subscribe to enjoy similar stories. A bunch of top companies is hanging on to almost ₹1 trillion of free cash that it has yet to find a use for, according to an analysis done by a proxy advisory firm. A report by Mumbai-based IiAS (Institutional Investor Advisory Services) of the Sensex 500 companies—with a few exclusions—shows that 66 of these companies collectively held ₹2.7 trillion in cash and equivalents at the end of FY24.

Of this amount, ₹99,100 crore remains unallocated for any purpose after accounting for capital investments or acquisitions. IiAS says these funds could be returned to investors through dividends or share buybacks, and raises questions over their dividend distribution policies. “In the absence of a clear plan to use the excess cash, boards must consider returning the cash to shareholders in the form of dividends or buybacks," analysts at IiAS noted in their report that was released on 26 December.

Also read | Shareholder nay to related party transactions may jeopardise Kalyani Group firm Tech heavyweights and industrial firms dominate the list. HCL Technologies, Bharat Electronics, LTIMindtree, Siemens, and Sun TV lead with ₹46,870 crore in combined cash reserves, of which ₹32,540 crore is deemed excess. Other notable mentions include Wipro Ltd, Hindustan Unilever Ltd, and Hero MotoCorp Ltd.

To be sure, many of these companies are already rewarding shareholders handsomely. The report notes that the 66 companies returned ₹57,397 crore to shareholders in FY24, equating to 54% of their aggregate consolidated profits. But IiAS managing director Amit Tandon argues there’s room for more.